GRATUITY LIMIT Rs 10,00,000/- OR- Rs20,00,000/-??

Yes Gratuity Limit Is Increased from Rs.10 lakhs to Rs.20 lakhs under section 10(10) of the income tax act, 1961.

NOTIFICATION?

Government increases Gratuity exemption limit u/s Section 10(10)(iii) to ₹ 20 lakhs from existing Rs. 10 Lakh vide Notification No. 16/2019 dated 8th March, 2019. This move will benefit those employees of PSUs and other employees not covered by Payment of Gratuity Act, 1972.

Limit for employees covered by Payment of Gratuity Act, 1972 was already been increased in private sector and in PSUs vide Government of India Notification dated 29.03.2018 under which the gratuity amount ceiling has been increased from Rs.10 lakhs to 20 lakhs w.e.f. 29.3.2018.

APPLICABILITY OF THE AFORESAID LIMIT TO?

The aforesaid limit is applicable to the employees who covered under payment of GRATUITY ACT,1972 and those employees who retire or become incapacitated prior to such retirement or die on or after the 29th day of March, 2018 March, or whose employment is terminated on or after the said date.

FOR EMPLOYEES WHO RETIRED ON OR AFTER 29-03-2018 AND FILED INCOME TAX IN THE AY 2018-2019?

In view of the aforesaid, those taxpayers who have received the gratuity during 29.03.2018 to 31.03.2018 and have filed their income tax returns for AY 2018-19 by claiming only Rs.10,00,000/- as exemption u/s 10(10) of the Income Tax Act, should revised their return of income to claim the benefit of the revised limit even if their return of income have been processed by the CPC.

EXEMPTION UNDER SECTION 10(10) OF THE INCOME TAX ACT, 1961?

The least of the following is exempt from tax:

  • Last salary (BASIC + DA)* number of years of employment* 15/26;
  • Rs. 20 lakhs (which has been hiked from Rs. 10 Lakh as per the amendment);
  • Gratuity Actually received

LET US UNDERSTAND THIS IMPACT THROUGH AN ILLUSTRATION:

The last salary drawn by Rohan is Rs.1 Lakh per month (basic + DA). He is entitled to receive a gratuity of Rs. 11 Lakhs. He has been in employment for the last 19 years and 7 months.

Sr. No. Particulars Previously As Amended
1 Last drawn salary (Basic + DA) 1 lakh 1 lakh
Number of years of employment 20 (will be rounded off) 20 (will be rounded off)
2 Maximum exemption allowed 10 lakhs 20 lakhs (as amended)
3 Gratuity actually received 11 lakhs 11 lakh
Amount of exemption (least of the above) 10 lakhs 11 lakhs
Taxable gratuity

NOTE:

  • 15 days salary based on the salary last drawn for every completed year of service or part thereof i.e. 15/26.
  • Number of years in service is rounded off to the nearest full year.

Disclaimer:"The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation."

Prepared By

Manoj.G

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Contact :

Ankit C Shetty

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